Systematic Covered Writing

    More than just covered calls . . .

Initial Position - The Math Exercise

This SysCW Initial Position was emailed to subscribers on the day the transactions were executed.  In order to know what to do in the future, it is important to understand what we did in the past.

---

The Email Comments:

The math works . . . in fact it works really!  Now . . . speaking of diversification.  How about a company that is involved with exploration and production, refining and marketing, and wholesale and retail distribution of oil and gas? Is that triple dipping?  Oh . . . and how about if the company is doing all of this in Papua New Guinea.  Stock is rated a moderate buy and 35% of the stock is owned by institutions.   

This position was added to the 100k Portfolio about 5 minutes ago.

The Covered Writer

Additional Comments:  I received the following information about additional risk associated with this stock from a subscriber. This covered writer provides some sound advise.

Papua New Guinea. Bottom line – look at the political risk before you buy!

 I just completed (11/06) a country study for US Army on Indonesia in general. There are some VERY specifics the U.S. is looking at in that part of the world. There are five (belligerents) interests trying to force the governments in the Indonesia area into an Iraq style situation…

 PNG ‘recently’ (in our time) gained independence and the issues of natural resources, the allocation of proceeds, and non-state (Corporate / terrorist) players causing hate, discontent and spite, four tribal / religious factions each with its own interests, were at the center. In a two year period at least 1,400 people have been killed by ‘government’ forces. 

This is linked back to a seaport (economic port) of An Sokna in Egypt (I did the country study in 2004 on this port). Liquid natural resources are one of eight ‘commodities’ handled in Egypt.  

There will be (in the near future) eight global ports from which the US will accept shipments from. AIG ($100 million), LVLT and a Dutch company are the key investors / providers. What is the long term implication if US Investments do not assist in developing PNG export facilities? 

Bottom line – look at the political risk before you buy!

---

 So, the writer will not be betting the farm on this holding, and it will be very interesting to watch world news for the next few months.

	Systematic Covered Writing
	… more than just covered calls!
	Initial Position:    The Math Exercise
	Position:	100   IOC   With   Sep 2007   $25.00   LEAP
	INTEROIL CORP				IOC Sep 2007 25.0000 call
	Stock Symbol			IOC		Call Symbol			.IOCIE
	Stock Purchase Price			$24.910		Call Sold Price			$5.60
	Number of Shares			100		Call Strike Price			$25.00
	Trade Entry Date			2-Feb-07		Expiration M & Y			9	2007
	Net Cash Generated			$551.75		Net Stock Investment			$2,498.00
	Net Return if Called			$536.75		Annualized  if Called (1)			33.95%		(A)
	Cash Required for Trade					$1,946.25
	Percentage Recovered w/Option *					22.09%	(B)
Days Until Expiration & Expire Date						231		21-Sep-07

PLEASE NOTE THAT THIS EXAMPLE IS NOT TO BE CONSIDERED AS A RECOMMENDATION TO INVEST IN IOC STOCK OR ANY OTHER EQUITY.  THE INFORMATION IS PROVIDED FOR EDUCATIONAL PURPOSES ONLY.  THERE IS NO GUARANTEE THAT SIMILAR TRANSACTIONS CAN BE EXECUTED IN THE FUTURE. INVESTING IN THE STOCK MARKET INVOLVES RISKS, DO SO ONLY WITH A KNOWLEDGE AND UNDERSTANDING OF THE RISKS INVOLVED!

The information provided above is for informational purposes only, and no mention of a particular security constitutes a recommendation to buy, sell, or hold that or any other security, or that any particular security, portfolio of securities, transaction, investment strategy is suitable for any specific person. You further understand that the Covered Writer will not advise you personally concerning the nature, potential, value or suitability of any particular security, portfolio of securities, transaction, investment strategy or other matter. To the extent any of the information available on this website may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. Always remember that past results are not necessarily indicative of future performance.

These are the terms of use.  Why are they here?  Because the examples provided are real.  The transactions actually took place.  The dates are real, the positions are real.  Some transactions will have been executed on the day you receive the email.  What you are agreeing to, is the fact that in no way is it being suggested that you can, or should, enter a similar position.  Why?  Because that would be providing investment advice and the Covered Writer is not authorized to do that.  There is also no guarantee that similar transactions could be executed at any time in the future. Only licensed brokers are allowed to provide investment advice.  Therefore, you are agreeing that the preceding example was provided for 'educational purposes' for the sole purpose of illustrating the Systematic Covered Writing strategies.

Thank you!

SYSTEMATIC COVERED WRITING
Copyright © 2006. All rights reserved.
Revised: 02/05/07